Q A's On Small Business Innovation

1. Why do its supporters call the Small Business Innovation Act "an urgent national need?"

Sen. Warren Rudman (R-N.H.) led a brilliantly successful fight for this bill in the United States Senate. In his words, "the problem, simply stated, is that of the present decline of the United States from its traditional position of prominence in the field of technology advancements."

We're paying for this decline every day in lost jobs and lost markets. One reason for the decline is an imbalance in the support given to the four parts of our national science base. Large-scale research by big companies, big government laboratories, and big universities has been strongly supported. Small business research has not. The small business sector receives only 3 1/2% to 4% of federal research-and-development money.

We lead the world in basic science and have for many decades. We spend far more on large-scale technology defense and development than the other free-world nations. Relying on us, these nations can -- and do -- put more of their public and private research budgets into commercial applications. That's one reason they've been clobbering us competitively.

Small business has proven to be our most efficient industrial application innovator; it's also our best and fastest job creator. Government-sponsored studies have shown small firms are between 1.8 and 2.8 times as innovative as large firms per employee. We need to beef up the support small business receives for research, and we need to do it fast.

Many of the aches and pains of our lagging industries go back a long way. The longer we delay, the longer it will take to recover lost ground. This bill charts a safe and sane program for curing the imbalance that has made us vulnerable. And it does so without allocating additional funds.

2. What exactly will the bill do?

Every federal agency that now spends more than $100 million a year in R&D will have a small business innovation program, modeled on the successful one now run by the National Science Foundation. A tiny share of each agency's budget will be used for the program. The share will very gradually increase over a five-year period. The increase ends when the share reaches 1% of the agency's total R&D budget (in the Senate's version of the bill) or 3% (in the House Committee's version). Small as these percentages are, they could mean as much as $1 billion to $3 billion for small firms over the next five years.

Small high-technology firms will compete for grants to do priority research for the government. Simplified procedures will encourage firms to bid. Competition will be open to all small firms, and experts, in and out of government, will impartially review the proposals. Today, many of the very best small companies won't even bother chasing government contracts. The procedure is too complicated; besides, the rules are stacked against small business.

The government will promote research projects that have potential commercial uses. But the small firms will have to be smart enough to figure out how to use them.Obtaining private venture financing will be the job of the small firm.

We know this approach pays off for the taxpayer. Private industry has already spent 4 1/2 times what the government invested in the first National Science Foundation grants. The Department of Defense has begun to use the same procedures.

3. Who is against the bill, and why?

Several universities and medical schools have expressed opposition. A number of career federal-procurement officials have dug in against the bill. They say they're afraid it will take needed funds from basic science. And they're lobbying representatives and congressional committees with whom they have long-standing relationships.

But, supporters point out, the Senate has adopted amendments to assure that the new program will not disproportionately tap that percentage of an agency's budget earmarked for basic research. Another amendment requires a report in two years by the comptroller general on the program's impact on basic research.

There are enough safeguards to satisfy reasonable people legitimately concerned about basic science. But some in the basic science community and in government want to use this bill to cry the blues generally about Reagan Administration budget cuts. Wrong place, wrong time, wrong target.

Of course, we must maintain a proper level of basic research. But our first and most urgent need is for the kind of applied-research program proposed in this bill. Without such a program, there is less and less justification for taxpayer supported, basic-science expenditures. It is irresponsible and grotesque for a community that receives more than $5.5 billion a year in federal grants to fight this bill.

4. What do the opponents expect to accomplish in the House by having four additional committees chew over the same legislation?

First, they would love to keep the bill from coming to a vote early in the second session of this new congress. They know the odds are overwhelmingly against them in an open vote. If they can stall, debate will have to start all over again next year. Presidential and Senate support may lessen. Small business may get tired.

Second, they can try to load the bill with troublemaking amendments. Four committees are more likely to produce these than one. Maybe they can smuggle a legislative stink bomb into the bill, something the House or the Senate or the President can't accept. Again, that might kill the bill for this year. Or maybe they can load the House members in a House-senate conference committee with opponents, making it impossible for the two houses to agree.

5. Can the opponents of the bill succeed?

The House leaders have the muscle, the votes, and the rules to get the bill through. It will die only under three conditions: (1) if the Speaker and House Democratic leadership connive with the opposition and do nothing, (2) if too many members of Congress either don't know what's going on or think the only folks back home who care are the opponents and their friends, (3) if you and your small business organizations don't speak up. Both your representatives and the House leaders must hear from you. If your representative isn't a sponsor, find out why.

6. Why is this bill a matter of honor and honesty between the House Democratic leadership and the small business community?

I never heard "Tip" O'Neill, Jim Wright, Dick Bolling, or any other House Democratic leader take a sacred oath to bring this bill to the floor by March 15, 1982.

But a Democratic President called a White House Conference on Small Business in January 1980 after a Democratic Congress (including Mr. O'Neill's House) asked him to do so in a piece of legislation. The 1979 version of this bill was introduced in the House by Neil Smith (D-Iowa), then chairman of the House Small Business Committee.

The delegates to the White House Conference voted Mr. Smith's bill -- much the same as the present H.R. 4326, introduced by John LaFalce (D-N.Y.) -- one of their 15 highest priorities. Very few of these people owned small high-technology firms. But they had come from 57 meetings with more than 25,000 small businesspeople all over the country. They had heard men and women from every kind of industry talk about the problems of overseas technology competition.

Late in 1980, the Speaker named a task force, made up entirely of Democratic representatives, to speed action on the White House Conference recommendations. He chose Neil Smith to chair this task force.

If this five-committee fandango is proof of the House leadership's fairness -- OK, if it doesn't last too long.If it is anything else, and this bill doesn't reach the floor early in the second session -- well let's just hope in the good name of the nation's oldest surviving political party that it doesn't happen.

7. Why should you care about this bill if your business isn't in high technology? Or if you aren't even a small businessperson?

This bill will benefit the whole country. We are all helped by productivity improvement, by cuts in the cost of capital equipment, by more competitive, cheaper, and better products and processes.

The President and every member of the United States Senate have clearly said the country needs this bill. You and your representative can make it happen now.